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UEFA Club Licensing Report: Football 2.0?

Hi everyone,UEFA released today the Club licensing benchmarking report. According to the european football governing body, this report comes at a key time, in the wake of financial fait play measures to ensure football’s stability. Here are the key points of the reports, which you can download in English, French, German and Russian.

UEFA has issued its third club licensing benchmarking report on European club football – covering financial results from nearly 650 top-division clubs from UEFA’s 53 member national associations.

The 2010 report covers figures from financial statements of 664 clubs – 90% of all top-division clubs. Much of the information is sourced directly from clubs that submitted financial information to their national associations as part of the club licensing requirements.

Football revenue continue to rise In 2009, total revenues for top division clubs increased 4.8% reaching a record €11.7bn. However various signs of financial distress are also identified, with the increase in revenues accompanied by a larger increase of 9.3% in costs that has severely impacted club profitability and contributed to record aggregate net losses of €1,179,000,000 – i.e. almost double that of 2008.

More than half of the European top clubs reported losses, with a worrying 28% of clubs reporting significant losses equivalent to spending €12 for every €10 income. More than one in eight club auditors expressed uncertainty over whether the club could continue as a going concern, reflecting these losses as well as many cases of club reliance on individual owners and/or precarious balance sheets.

Players’ wages are costly

Players’ wages represent the most significant costs sustained by football clubs and the percentage of income paid to employees increased from 61% to 64% over the period. Transfer activity also slowed down as a consequence of a lack of liquidity, which resulted in increased financial difficulties for clubs which rely on transfer income to improve their net result.

In particular, this negatively impacted on many clubs who are traditional net exporters of talent, such as French, Dutch and Portuguese clubs. An estimated €800m worth of transfer fees are not due to be paid for more than 12 months. The report states that investments in youth football remain low, with top-league clubs generally preferring to field experienced players with resultant higher salaries, or recruiting players trained at other clubs.

Average match attendance is stable or lower

Average match attendance remained either stable or went down in the majority of domestic championships – reflecting the tough economic times and a lack of new investment in an area where only 19% of clubs own their own stadium. This situation has a direct impact on the revenue streams that can be generated by football clubs. On the one hand, the majority of clubs lack control over what is potentially their biggest asset and cannot exploit it apart than from match days.

The financial challenges illustrated above are common to top-division clubs across all 53 national associations, the report states. However, it adds that the situation is even worse down the football pyramid, where the risk of insolvency and bankruptcy is much higher than the top divisions.

So…

In this context, the report reflects, the phased implementation of the new UEFA Club Licensing and Financial Fair Play Regulations is aimed at encouraging clubs to better manage their finances, and achieve a sustainable balance between income, spending and investment. The report states that if the new regulations were applied today, several clubs would fail to comply with the new rules – in particular the break-even rule which is the cornerstone of the financial fair play concept. Clubs need to adapt now, the report urges, to prepare for tomorrow.

UEFA’s financial initiatives are earmarked for the European competitions, but the report expresses the wish that similar measures and requirements be introduced at domestic level with long-term benefits in mind.

The implementation of the new rules, the report concludes, will challenge a number of clubs to put their finances in order. The European body, however, believes that systematic handling of current problems is the only way to guarantee fair competitions, as well as financial discipline and stability in the long term.